Tuesday, May 17, 2011

Big Oil vs. Big Government

We hear it all the time: “big oil companies are evil”! They charge a fortune for a gallon of gas and reap record profits. People are 30 times more likely to Google big oil profits than big oil taxes (97% to 3%). Why? This is the picture that the media, environmentalists, and progressives paint. Actually, I have absolutely no problem with these folks ganging up on oil companies so long as they live the way they preach. If people are living with a small carbon footprint (can calculate it at http://epa.gov/climatechange/emissions/ind_calculator.html) and or are working on green technology, then please complain. My experience with so called righteous environmentalists is that they are hypocrites and are no better than “armchair quarterbacks”. In other words, they not only expect others to make sacrifices but they expect them to be the innovators to fix greenhouse emission problems. This is life, it is full of people that have strong opinions and who love to complain, but when push comes to shove they are no better than carbon emitting oxygen thieves. If your carbon footprint is lower than mine, then please complain (my wife and I combine to have footprint that is half that of the average American). Let’s clarify a few things about big oil companies first. The oil and gas industry profit margins rank 60th overall at about 8.1 cents per dollar spent. The pharmaceutical industry rakes in about 19 cents profit for every dollar, banks about 18 cents per dollar, financial services about 13.5 cents per dollar, telecom about 9 cents per dollar, and food and beverage about 8.5 cents per dollar. The average U.S. industry averages about 7 cents profit for every dollar spent. In 2009, Exxon was Forbes “Green Company of the Year”. They spent billions in research and building algae farms to generate gas. And they finished a 30 billion dollar natural gas field that is expected to lower carbon emissions by a billion cubic tones per year. Heck, the CEO of Exxon has no problem with cap and trade and paying a higher share in taxes.

From 2003 to 2008 Exxon paid nearly 100 billion in income taxes – enough to pay for the budget of the Department of Education, Department of the Interior, Department of Justice, the Environmental Protection Agency, and the Department of Commerce in 2011. In fact, Exxon’s yearly tax contribution is equal to more than what the bottom 50% of Americans pay in taxes (160 million people). That statistic includes only Exxon and it does not include the likes of Chevron or Conoco. It is true, due to tax loopholes (that need to be closed), Exxon paid no income taxes in 2009. They paid about 15 billion in income taxes to foreign countries (but foreign income taxes can be written off in the U.S.). Overall, in 2009, their products resulted in nearly 80 billion dollars in tax revenues for the U.S. and foreign countries (an effective tax rate of 47% on their product – no other American industry has an effective tax rate near this high). Yes, this does include sales tax and I realize that people pay sales tax, but there is no denying that both foreign and U.S. governments are collecting massive tax revenues off oil products. It may surprise some, but depending on the year, the government (including local, state, and federal) collects anywhere from 3 to 6 times more in tax revenues than oil companies receive in profits.

While oil companies receive about 25 cents profit from a gallon of gas. The federal government collects 18.5 cents per gallon and states collect, on average, 29 cents per gallon for a total of 47.5 cents in sales taxes (15 to 20% sales tax rate!). Exxon is paying about 35 to 50 cents a gallon in federal income taxes (including foreign – remember their profits include what is generated globally – not just in the U.S.). Thus, governments are collecting nearly a dollar for a gallon of gas whereas, oil profits are much lower. Thus, it is government greed that is driving up the cost of gas, not oil companies whose profit margins are less than 10%.

I think liberal politicians love big oil! They may complain about them in public, but big oil companies are a cash cow that supports their liberal agenda. Besides, politicians are generally some of the biggest carbon emitters (look at the monthly electric bill of government buildings). Here is a question to ponder - Where will struggling state and federal governments recoup these tax dollars if we go green?